Retailers finding booming market buying used electronics

As electronic devices proliferate, retailers are seeing record numbers of used laptops, smartphones and tablets being sold for quick cash or credit.

Best Buy launched a trade-in program in 2009 for items such as cellphones, video games and computers, and it's getting more popular every year. It now accepts more than 11,000 different items. "The trade-in volume has doubled every year since 2009," Jeff Shelman, a Best Buy spokesman, wrote in an email.

At Pawn America's 29 Midwest locations, most cellphones, laptops and tablets are sold, not pawned, and the numbers keep growing. In 2013, sales of used cellphones were up 14 percent, laptop sales increased 30 percent and tablets sales doubled.

"The secondhand market for personal electronics is super-hot," said Karl Hattman, regional manager for Pawn America. "Consumers are more accepting of buying secondhand goods."

Fortunately for bargain hunters, there are also plenty of consumers who want the latest and greatest technology, requiring them to get rid of a still-valuable model from a year or two ago. Because the value of the items may range from $50 to $200 or more, they aren't sitting forgotten in a drawer anymore.

Consumers are now upgrading their smartphones every 12 to 18 months (less often for tablets and laptops), said Louis Ramirez at DealNews.com.

"Manufacturers are refreshing their product lines so quickly that it's creating a bump for used electronics," he said.

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People are trying to maintain their devices in mint condition, and keep the original box and manual, because they've learned that they get more cash or credit for them, Ramirez said.

Consumers have a flurry of options to unload their old, but not too old, technology. Pawnshops have been a popular go-to for many years, but retailers such as Best Buy, Target, Walmart and Radio Shack offer store credit in exchange for used personal electronics online or in stores.

So many sites will pay cash to people who mail in used devices (Gazelle.com, BuyBackWorld.com and Nextworth.com) that aggregators such as Usell.com have popped up, listing bids from multiple resellers.

In fact, an hour after Apple (AAPL) CEO Tim Cook debuted the iPhone 5S and 5C models on Sept. 10, Gazelle was getting 600 offers per second on earlier models, according to Anthony Scarsella, chief gadget officer at Gazelle.com.

Manufacturers are joining the fray, too. Apple offers store credit while Samsung offers a prepaid Visa card. "Why let Amazon take their lunch when manufacturers can buy these items directly from the consumer?" Ramirez said.

One retailer is going a step further. Wayzata, Minn.-based NYT Franchise Co. just opened Device Pitstop in Minnetonka, Minn. The store buys and sells used and refurbished smartphones, laptops, tablets and all-in-one computers from brands including Apple, Android, Acer, Compaq, Dell, HP, IBM, Sony and Toshiba. Laptop prices range from $99 to $500, tablets from $159 to $400, and smartphones from $100 to $300.

The retailer also does repairs, upgrades and servicing. Employees inspect devices in the store and repair them in-house, usually within a few days. Common repairs so far have included tablets and smartphones with cracked screens.

"A lot of people think small electronic items can't be fixed," said Dave Brennan, co-director of the University of St. Thomas Institute for Retailing Excellence.

But often they can, and consumers are starting to realize that even a tablet with a cracked screen may have value.

Brennan said retailers need to reassure customers, employ staff with significant technical skills and offer some sort of a warranty.

"Auto dealers are now offering certified and warrantied used cars," Brennan said. "Consumers want assurance that the retailer will correct any issues that come up if they buy used."

Device Pitstop includes a 90-day warranty on all products to put customers at ease, said Mike Smith, vice president of operations.

Terri Harris of Maple Plain, Minn., took her work iPad into Device Pitstop to get an estimate on repairing a cracked screen.

"I didn't even know if it was possible to replace it," she said. "I've had clear tape holding it together for a year."

For $150 the crack could be repaired, but Harris had to check with her employer to approve the expense.

Device Pitstop is a franchised retailer with seven locations in Las Vegas, Phoenix and Lexington, Ky. Smith said the company hopes to add 300 nationwide within five years.

Smith is confident the used personal electronics market will continue to grow. "It used to be young males, but now we're getting an older demographic and families, too," he said. "They like being able to see and test used items in person, and getting a warranty. You won't get that on eBay (EBAY)."